Asset Based Lending – Non Bank Revolving Business Credit Line Facilities

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Is There Some Fuzziness Around Your Firm’s Ability To Get The Business Credit Line It Needs? Here’s a Solution!

OVERVIEW – Information on asset based lending and non bank operating and revolving facilities and how these financing solutions can improve working capital and cash flow for Canadian business owners

Asset based lines of credit are a unique way for Canadian business owners to achieve operating liquidity outside the chartered bank environment.

Asset based lending, also commonly known as 'ABL ' financing in Canada, is not debt financing, and should not be confused as such - It is operating and working capital financing.

Asset based lines of credit are used by medium sized firms and larger firms throughout Canada, and are growing in popularity. In general they are inappropriate and difficult to structure for small firms and start ups - In those two cases it might be more advisable to focus on straight receivables financing solutions such as factoring.

Canadian asset based lines of credit are structured around some of the following parameters:

- Industry fundamentals such as asset quality and perceived industry risk

- Your general credit profile

- Size of the financing facility and who is offering the facility (the industry is somewhat fragmented in Canada


We noted your firms ' general credit profile ' as a key consideration. Probably the most surprised of our clients are the ones that now understand that while overall financial statement strength is one factor in the financing facility such as this, it is absolutely not the most important factor. Why? That is because an ABL facility focuses more on assets than operational performance.

We are not telling clients that they can get an asset based line of credit if their firm is in a serious death spiral, but if your firm has challenges such as temporary operating losses or an extenuating circumstance setback you still are a very strong candidate for asset based financing credit.

How do these facilities work? Very simply it's a similar version of a bank operating line of credit, but without many of those restrictions, covenants, additional collateral requirements, etc. Receivables, inventory, and sometimes equipment and real estate are margined to their proper values. Typically that is receivables at 90-100% of invoice value, inventory at 40- 80%, and equipment and real estate per acceptable appraised values.

Are there any drawbacks to such a facility - we can think of two discussion points and they aren’t necessarily hard and fast drawbacks - those two points are :

- Pricing
- Reporting

Asset based lines of credit traditionally have higher pricing than bank lines, and you are more often than not required to do detailed reporting of a/r, inventory values, etc on a monthly basis . We point out to customers that additional reporting can sometimes turn into a benefit as it helps you understand your business better!

In summary, asset based lines of credit are financing facilities that provide alternative funding to typical banking type arrangements. They almost always give your more capital, you do not incur debt, and in many cases can help your firm either regain its financial footing or grow more quickly.
Talk to a credible, experienced financing expert for information on this unique type of financing.


7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com


Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.

Stan Prokop